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Oct 25 2013 Weekend Market Comment

Oct 25 2013 – It almost Halloween so lets see if there will be tricks or treats this week. Japan's stock market is in the process of getting destroyed, and U.S. investors are treating it like an entertainment that is only partly scary and mostly funny, like a Godzilla movie with rubbery monsters and bad dubbing.

This is either a rational response or a clueless response to what's happening. If investors are being rational, then the Nikkei stock index's 20 percent collapse since May 23 is nothing much to worry about. If they are being clueless, then the Nikkei's bear market is a warning sign that the rubbery monsters are going to cross the Pacific and start stomping on U.S. markets, too. Not so funny then!

(as always click any graphic to enlarge) 
Here's the case for not worrying so much about Japan: The Nikkei's collapse is happening mainly because investors are starting to wonder whether Prime Minister Shinzo Abe is going to be able to effectively work his plan to ply Japan's lousy economy. High hopes for Abenomics had fuelled a wave of optimism about Japan's economic prospects in recent months, but that confidence has wavered recently.

But its not just Japan treading water -- Australia’s S&P/ASX 200 Index slipped 0.9 percent, while New Zealand’s NZX 50 Index lost 0.4 percent. Hong Kong’s Hang Seng Index and China’s Shanghai Composite Index both fell 0.3 percent. South Korea’s Kospi index declined 0.1 percent. Taiwan’s Taiex Index dropped 1.1 percent. Singapore’s Straits Times Index declined 1 percent.

The Philippine Stock Exchange Index sank 3.8 percent, the second-biggest decline among Asia-Pacific benchmarks, as concern valuations are excessive overshadowed data showing the economy grew in the first quarter at the fastest pace in three years.

But in the West we are partying like its 2006 again. All Western markets are up in the last 25 days, All of Europe, Canada, the USA and even Mexico are enjoying 52-week highs and stable markets. Of course what kicked this off is a double dose of good news for speculators, first the US did not default and passed a last minute raise the debt ceiling bill and a jobs report that was a little short of expectations but still up – virtually guaranteeing quantitative easing for the quite some time to come. Meantime the big funds were buying hot and heavy because they regretted missing the move up so far. So what are money mangers so jealous of . .  . Well Carl Icahn for one.

Carl Icahn didn’t become one of the world’s richest men by not knowing how to take profits off the table. The billionaire money manager sold a sizable slug of his Netflix NFLX -0.94% shares Tuesday after quarterly earnings sent the already lofty share price to fresh heights. Icahn disclosed that his stake in the streaming video company is now 4.5%, down from 9.4% at the end of June, the last time he publicly disclosed his holdings. Icahn first revealed a position in Netflix just under a year ago and has enjoyed a gain of some 457%. The largest portion was the 2.4 million shares he sold Tuesday at $341.44, for more than $819 million. Icahn has a cost basis of $58 per share, the release says, which means he made an $825 million profit on the 2.989 million shares he sold over the last two weeks.

This rally has been strong in large part because we have past that the dangerous October period, and entered the point in the year large money mangers take their final quartile positions. Last chance to be a big winner. But what they are buying is very selective.

Federal Express has had monster move and transportation stocks doing well is a great sign for the rest of the market.

Technology on first glance is doing well just look at Goggle and Amazon

But did a little deep and perhaps not so great after all, semiconductors are flat, networking shares have fizzled, F5 Networks is looking awful

Many Consumer discretionary stocks like Michael Kors Holdings, Decker’s Outdoors and my personal favourite ULTA cosmetics are having a merry Christmas run up.

While other areas are really not doing well at all. The US Banks and Financials are not keeping pace.

Traditional retailer Macy's is doing very well with solid growth, and clearly pulling share from dying retailer JC Penny, but no one is buying the stock, they only want new economy stocks. 

However in the big picture the market is again at 52 week highs. I hope you held your DVY recommended here two weeks ago now, up 3.5% in two weeks.

Overall this look very much like institutional buyers trying to be where the action is, looking for a high-tech Christmas with lots of online sales, but the overall economy is just not that strong and with no participation from US Home builders, financials or Asia, this probably is near the top of this run up. It could go up to three more weeks but not at this pace. 

You can see form the 50 day Overbought graph that we are up in the the higher atmosphere. 

Same with the YP Primary Sell, but don't forget it is not a true sell until it passes zero, but it is flaccid to say the least. 

Same is true of the Green Arrow graph. Party not over but coming soon. 

A Look at Canada
Its a bit odd that Brazil and China are on their butts but Canada is up. Up until a few weeks ago Canadian markets were up only 4.5% in the same time the USA was up 22%. In what looks like a revision to the mean trade Canadian markets have perked up all all western markets.

I hope you held steady freddy -- Methanex  Corp now hitting a fresh 52 week high again.

Pipelines are perking up on News on further optimism that they will be getting the green light to expand. Here is Enbridge:

and IPL:

Even traditional Canadian plays are doing very well, like Teck Cominco, Power Financial and Banks like BNS


The current low cost of Canadian oil combined with strong prices at the pump has help big dividend payer Parkland Fuel. With a dividend yield of 4.5% and good growth in Western Canada.  These good folks own the gas station chain Fast Gas and are also a small time refiner and thing have been going great for them.


Bicycle sales outpaced new-car sales last year in all of the 27 member countries of the European Union, except Belgium and Luxembourg, NPR reported on Oct. 24. One reason is that car sales have slumped in the midst of the euro-zone crisis, NPR points out. But there are signs that this slump isn’t temporary. It’s a reflection, perhaps, of a larger change in how people are traveling.

In developed economies, the numbers of cars owned and miles traveled have increased most years since the 1950s. Even before the financial crisis, that started to change. In the US, total miles traveled per person plateaued in 2000 and started falling in 2004. (Measured in miles per vehicle, that rate flattened in 2004 and started declining in 2007.) Today, young Americans are less interested in getting their licenses as early as possible or even at all. Meanwhile, global bicycle production has been growing faster than car production since the late 1970s:

World car and bicycle production
There are a couple of reasons for the shift. The cost of fuel and insurance in many countries has gone up. And perhaps more importantly, cars have become less of a badge of prestige or money—at least in developed markets.

In Europe, predictably, countries hit by the economic slowdown have been the first to jump on their bikes. In Italy, in both 2011 and 2012, more bikes were sold than cars. In Spain, last year marked the first time the two-wheeled vehicles had ever outpaced cars since the country started compiling the related data. Just look what they are doing in the Netherlands.

So is this a health craze or are we going backwards to a slower pace?